The best towns for start-up success in Kenya

By Dominic Omondi | Wednesday, Sep 12th 2018 at 09:59
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When it comes to investment, many people believe Nairobi, the country’s capital city and commercial hub, is the place to be.  

However, a new study by the Institute of Economic Affairs (IEA) has shown that the towns of Eldoret and Mombasa rank ahead of Nairobi in providing an enabling environment for doing business.

It’s a ranking that largely coincides with the findings of a 2016 World Bank study, where the two counties were once again found to have an impressive investment environment.  

In the IEA study, dubbed the Kenya Urban Areas Performance Index 2017, the city of Mombasa was ranked first when it comes to investment and trade.

Where to invest in Kenya.

This was as a result of the officials of Mombasa County providing information to investors in Kenya’s two official languages, English and Kiswahili.

The city also had the highest number of building permits issued at 0.83 per 1,000 people, and saw relatively high growth (10 per cent) in the number of business licences issued per person. And of the six urban areas covered in the IEA report – Mombasa, Nairobi, Kisumu, Machakos, Eldoret and Nakuru, it takes the shortest time at 41 days to register property in Mombasa city.

Tax friendly towns in Kenya.

Business permit costs

Nakuru, Kisumu and Machakos didn’t do too well in the ranking over non-disclosure on the number of business permits issued. However, the study found Nakuru to have the most tax-friendly environment of the six urban areas.

“It provides sufficient information on local taxes and levies like most of the other urban areas, but has the lowest parking fees at Sh100,” said IEA Programme Coordinator John Mutua.

Further, in Nakuru, the cost of a single business permit for a general merchant shop is Sh4,000, against a mean cost of Sh5,367.

Mombasa’s single business permit levy for a general merchant’s shop of Sh7,000 is the most expensive in the six urban areas studied.

Good outcomes

The 2016 World Bank report, which looked at things from the perspective of small and medium-sized firms, found that it’s easier to start a business in Uasin Gishu (Eldoret), deal with construction permits in Kisumu, register a property in Nairobi and enforce a contract in Busia (Malaba).

It also found the process of obtaining a business permit being relatively inexpensive and taking two days in Kiambu (Thika) and Uasin Gishu (Eldoret), making these two counties among the best to start a business in.

The study focused on whether a county economy had in place rules and processes that lead to good outcomes for entrepreneurs, in turn increasing economic activity.

“Nairobi – the most populous county – leads on the registering property indicator, but brings up the rear on dealing with construction permits,” found the World Bank.

The report added that starting a company in Kenya requires seven procedures, takes 23 days and costs 22 per cent of the country’s income per capita on average. 

“Within Kenya, (starting a business) varies from 20 days in Mombasa and Uasin Gishu (Eldoret) to 27 days in Narok and Nyeri. Start-up costs range from 18.1 per cent of income per capita in Nyeri to 26.9 per cent in Mombasa”

The World Bank noted that these variations in costs are driven by the time it takes to set up and the cost of local permits.   

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